UI

A transparent Regulatory Framework is required for making the sector viable for its growth as well as invoking investor confidence in the sector. To meet the growing expectations of the manufacturers, investors and consumers, CERC (Central Electricity Regulatory Commission) has amended key regulations and issued orders that can lead to the betterment of the power sector. Some of the amendments done by the regulator can be summarized as follows:

•Compensatory tariffs Approved: In Feb’14 CERC allowed compensatory tariff hikes for the two major power sector players namely Tata Power’s Mundra UMPP and Adani’s 4620 MW Coal Based Power Plant located in Gujarat.
( http://www.cercind.gov.in/2013/Reports/COMREP_CGPL.pdf) In lieu of the change in regulations of Indonesian Mining (2011)http://www.indonesiamininglaw.com/tag/iup/, the two players objected of suffering high landed cost of coal and thereby leading to loss on the exchequer’s pocket. Since the tariff revision is effective from April 1, 2013, CERC has directed the concerned DISCOMs to reimburse Rs 3.29 billion to Tata Power and Rs 3.89 billion. Some of the state DISCOMs (Rajasthan,Punjab,Maharashtra) have challenged CERC’s order before the Appellate Tribunal for Electricity (APTEL).Reliance also filed the petition concerning its Tilaiya UMPP in Madhya Pradesh. Adani has been allocated Lohara Coal Block for its project which covered around 75% of the coal requirement for the project but that came under the scanner of Ministry of Environment and Forest thereby leading Adani to hunt for alternate sources for fuel. This ultimately led to escalation of its levelised tariff as defined in the PPA.

•Tariff Regulations : In feb’14 CERC came with the new Tariff regulations 2014-19,http://www.cercind.gov.in/2014/regulation/reg21.pdf which put forward many changes leading to strong repulsion from the major players in the market:
o Incentives for players have been linked to Plant Load Factor(PLF) as compared to Plant availability factor(PAF) as described in the earlier regulations.
o The base RoE(The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested) has been fixed on 15.5 % but FGMO,www.srldc.org/var/ftp/FGMO/FGM%20IN%20SR.ppt has been critically linked with it leading to tough times for Generators.
o Provision of PAT(Perform, Achieve and Trade)http://www.performachievetrade.com/ has also been included in the guidelines issues.
o Heat rate norms have been made more stringent for existing as well as new power plants. The factor has been changed to 1.045 from 1.063 (Kcal/KwH)
o The normative annual PAF has been reduced to 83 % from 85 %.
Responding to CERC Tariff Regulations, NTPC moved to courts against CERC mentioning that the PLF based incentive could hit their profitability.

•IEGC Amendment: In Jan’14, CERC issued an amendment to IEGC regulations 2010, further tightening the frequency band to 49.9 Hz – 50.05 Hz from the earlier range of 49.7 Hz -50.2 Hz.http://www.cercind.gov.in/2014/regulation/noti18.pdf In addition to sandwiching the frequency range, Grid integrations has also been pushed further with the inter-connectivity of Raichur-Sholapur transmission line. In context with the change in IEGC regulations, Penalty charges related to deviation mechanism of Unscheduled Interchange (UI) has also been revised.

•Open Access Regulations: Apart from the changes concerning LTOA (Long Tern Open Access) and MTOA (Medium Term Open Access) in Interstate Transmission Regulations, 2008 , there have been proposed amendments regarding the connectivity of renewable energy projects of 5 MW – 50 MW capacity with the interactive grid.

•Power System Development Fund,http://powermin.nic.in/whats_new/pdf/Operationalization_of_Power_System_Development_Fund_Jan2014.pdf : CERC issues PSDF regulations 2014 replacing the earlier PSDF regulations 2010 and intents to push the investments in the transmission sector. The fund will be maintained through a collection of Congestion charges, deviation settlement charges and reactive energy charges. Primarily the fund will be used for capacity building in the transmission sector including installation of shunt capacitors, series compensators, VAR compensators etc.

•PoC Tariff Regulations : In Feb’14 CERC issued a draft amendment regarding the sharing of Inter-state transmission charges and losses regulations, which incorporated the PoC methodology of determining the cost and losses to be shared by the users of the ISTS(Inter State Transmission System)

•RE Tariff regulations: In Mar’14 the first amendment to the Terms and Conditions for Tariff determination from RE sources regulations were approved by CERC,http://www.cercind.gov.in/2014/whatsnew/SO354.pdf. The amendment aimed to address various issues faced by biomass plants.

Power Trading has come a long way since trading has been recognized as a distinct entity in Electricity Act, 2003.

What is Power Trading?
Basically, Power trading is an activity of buying and selling of power at Power Exchanges, which are approved by Central Electricity Regulatory Commission (CERC)and moreover standardized Products are offered to buy and sell power. Thus Power is traded like a commodity at Power Exchanges like IEX (India Energy Exchange), PXIL(Power Exchange India Ltd.) Likewise shares trading are done on SENSEX etc & commodity trading at NCDEX etc.

What is Open Access?
Open Access allows large users of power having a connected load of 1 Megawatt (1MW) to buy cheaper power from the market.

Acc. To EA 2003 Sec 2(47) : “open access” means the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission;

Types of Open Access:
• Inter State Open Access: When buying and selling entity belong to different states.
• Intra State Open Access : When buying and selling entity belong to same state.Types of Power Trading?

Broadly Power trading can be sub classified on the basis of duration of contracts and energy trading platform.Types of Exchange

What are the statutory requirements for Power Trading?
Some of statutory requirements notified by CERC are:
• Demand should be atleast 1000KVAH
• Connected to atleast 11KV line
• Should have 0.2S class CT/PT
• Should have 0.2S class ABT meter
• Consent from DISCOMs/SLDC to trade power.

HHI stands for Herfindahl-Hirschman Index
A commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in a market, and then summing the resulting numbers. The HHI number can range from close to zero to 10,000.In case of p
For the year 2012-13, HHI was 0.1437

Some Facts about Power Trading (Ref from CERC’s MMC Report)
• In 2011-12, Weighted Average price of electricity traded through Power Exchanges Rs 3.67 / unit and through trading licensees Rs 4.33 /unit.
• During the year 2012-13, 89% of the volume of electricity in IEX and 94% of the volume of electricity in PXIL was transacted at less than 6/kWh. 70% of the volume in IEX and 73% of the volume in PXIL was transacted at less than 4/kWh
• During 2012-13, only 179 million units of electricity was exclusively bought during peak hours under bilateral transactions from traders (exclusive of banking). This was 0.79% of the total electricity bought under bilateral transaction from traders (excluding banking). A major part of this, 93.24%, was bought on round the clock (RTC) basis, followed by 5.97% exclusively bought in periods other than peak periods. The per unit price of electricity procured on round the clock (RTC) basis was the cheapest (4.29/kWh), followed by electricity exclusively procured during non-peak hours (4.66/kWh) and electricity exclusively procured during peak hours (4.97/kWh).